Tag: debt

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The true student debt crisis

If you borrowed money from the federal government to finance your education and you’re having an extremely hard time paying it back, I have good news for you. As Slate reports, “President Obama has just signed an executive order that expands eligibility for Pay As You Earn, a newish program that caps the monthly debt payments of eligible borrowers to no more than 10 percent of their monthly income. And if you still have outstanding debt after 20 years, or 10 years if you work in the public sector or for a nonprofit, it will be forgiven, like a youthful transgression.imgres-1

“You crazy kid! Remember when you thought taking on this student loan debt made sense because getting a college education meant that you’d eventually earn enough to pay it off? Oh gosh. Those were the days. Clearly you had been passed the peace pipe once too often.

“Cutting debt payments for cash-strapped borrowers is a nice gesture. In 2008 and 2012, Barack Obama fared well with under-30 voters, and Pay As You Earn will give some of them a nice little boost, just in time for the midterm congressional elections. But there is a much larger problem that the president’s feel-good proposal fails to address, which is the fact that people who take on federal student loan debt aren’t earning enough to pay it back. America’s higher education institutions aren’t offering value for money. And that’s a problem that tinkering with the federal student loan program won’t solve.

“To state the obvious: Borrowers can’t handle their debt payments because of the general weakness of the economy. It would be far easier for borrowers to repay their student loan debt if they weren’t unemployed or underemployed, and it would be easier still if they were employed in jobs that offered robust wage gains over time. Yet the debt crisis also reflects the corruption of mass higher education in America.

Continue reading “The true student debt crisis”

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Women accumulate larger student debt

When Kristine Leighton graduated from a private college five years ago with a degree in hospitality, she owed $75,000 on student loans.

Each month, she paid the minimum amount of $450 and lived at home with her parents on Long Island, N.Y.

NPR reports that “At first, she was working at a hotel for $10 an hour; money was tight. Even after she got a job in Manhattan making $75,000 a year, she still couldn’t afford to move out. She funneled her earnings into car

payments, credit card bills and debt, and a monthly commuter train pass. The loan payments left little extra

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money for things like an emergency fund.At one point she upped her monthly student loan payments to around $1,800 for almost a year, in an effort to chip away at her debt as much as she possibly could. To prepare for the future.”I was trying,” Leighton says.

“I had this great job, this great career, but I still couldn’t afford to move out of my parents’ house.

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“Women have made gains in the workplace but there’s still a wage gap. Although attending college costs the same for both genders, women are more burdened by student loan debt after graduating. They spend a higher proportion of their salaries on paying off debt because, well, they have lower salaries to work with than men — from the very start.After college, with $75,000 in student debt, Kristine Leighton struggled to pay it off and start her adult life. “I was trying,” she says. “But I still couldn’t afford to move out of my parents’ house.”

“A study by the American Association of University Women found that one year after college, nearly half of women working full time, and 39 percent of men, were devoting more than 8 percent of their income toward their debt. That may seem small, but when you are fresh out of college, the combination of living expenses, credit card bills or debt, a 401(k) and a little left over for savings — if you can hack it — adds up. Continue reading “Women accumulate larger student debt”

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Having millionaires help with student debt

Sen. Elizabeth Warren (D-MA) laid out a new plan that would tax millionaires and use that revenue to help students

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refinance their student loans, as reported by ThinkProgress

“Delivering the keynote address at the Higher Ed Not Debt Campaign launch event on Thursday at the Center For American Progress, Warren argued that America faces a choice: “Do we invest in students, or millionaires?” Warren plans to introduce a bill that would create an “America that invests in those who get an education” by revising the tax code and enacting the Buffet rule.

“The Buffet rule is named after billionaire Warren Buffet and would establish a minimum tax on income in excess of $1 million. The measure, which never got out of Congress, raises approximately $50 billion in revenue and ensures that millionaires do not pay lower tax rates than middle-class families.

“Congress acted to lower the federal unsubsidized student loan interest rate to 3.86 percent for undergraduates for the 2012-2013 academic school year. But unless it acts again, the $1.2 trillion in outstanding student loan debt will continue to grow.

“Warren’s plan would allow students with outstanding student loans to refinance at lower rates. The cost of the change would be covered by a “dollar for dollar” effort where for “every dollar the Buffet rule brings in, we use that dollar to refinance student loan debt,” she explained. She estimated that recent graduates who borrowed the maximum in undergraduate loans could see their payments drop by $1,000 a year and total interest paid over the life of the loan could be cut nearly in half. Continue reading “Having millionaires help with student debt”

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Ivies in debt? No Worries

Eleven of the nation’s most selective universities together have $26 billion in debt on the books, according to a new analysis, reports InsideHigher Edimages-1

“But while much smaller debt loads would be seen as risky and perhaps life-threatening for less-well-off institutions, these universities have top-notch credit ratings and could probably borrow more if they wanted.

“The Ivy League colleges plus Duke University, the Massachusetts Institute of Technology and Stanford University had $26.42 billion in debt at the end of the 2012 fiscal year, according to figures reported by the Cornell Higher Education Research Institute.

“In an article for Cornell Alumni Magazine, which is operated by the alumni association independently of the university proper, the institute’s director, Ronald Ehrenberg, and research assistant, Ross Milton, argue that the figures alone don’t tell the full story. Instead, they argue, observers need to look at why and for what a college borrows.

“Of the institutions they examined, Cornell had the highest ratio of debt to endowment size — $1.8 billion in debt and a $4.4 billion endowment.

“The real issue to me is, what is the impact of each of these debt-financed projects on the operations of the university?” Ehrenberg said in an interview. Continue reading “Ivies in debt? No Worries”

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Seniors in debt over kids’ school loans

“The early-morning calls from debt collectors continued even after her massive stroke, waking Bella Logan to daily reminders that she owed $75,000 in student loans. Logan is 94.” This is from today’s Columbus Dispatch, and the story is a grim recessionary tale:

Light at the End of the Road

“The federal government garnisheed $200 a month from Robert Austin’s Social Security checks for years for student-loan debt, leaving Austin without money he needed for medications. He is 83. After Ray Stockman’s wife died, he wanted to move but was turned down three times Continue reading “Seniors in debt over kids’ school loans”

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American maxing out their credit cards

We like to crack a joke about this, but the reality is just too sobering. Consumer credit-card debt in the US has hit an all time high. The poor economy, a consumption-driven culture, and predatory banks offering credit to those who can’t pay. These facts from the current Huffington Post contradict a recent article in Time Magazine celebrating an apparent decline in overall household debt. But if you read the fine pint in the Time article, you see that the gross number drop is cause by massive loan defaults across the country. As Martin Crutsinger writes in Huff Post,

Americans swiped their credit cards more often in October and borrowed more to attend school and buy cars. The increases drove U.S. consumer debt to an all-time high.

The Federal Reserve said Friday that consumers increased their borrowing by $14.2 billion in October from September. Total borrowing rose to a record $2.75 trillion. Continue reading “American maxing out their credit cards”

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More reasons to hate bankers

“In the 2012 edition of Occupy Money released this month, Professor Margrit Kennedy writes that a stunning 35% to 40% of everything we buy goes to interest. This interest goes to bankers, financiers, and bondholders, who take a 35% to 40% cut of our gross domestic product.” So says an article in today’s Asia Times by Ellen Brown, entitled  “Why Bankers Rule the World.”

As Brown continues, “That helps explain how wealth is systematically transferred from Main Street to Wall Street. The rich get progressively richer at the expense of the poor, not just because of “Wall Street greed” but because of the inexorable mathematics of our private banking system.

“This hidden tribute to the banks will come as a surprise to most people, who think that if they pay their credit card bills on time and don’t take out loans, they aren’t paying interest. This, says Kennedy, is not true. Tradesmen, suppliers, wholesalers and retailers all along the chain of production rely on credit to pay their bills. They must pay for labor and materials before they have a product to sell and before the end buyer pays for the product 90 days later. Each supplier in the chain adds interest to its production costs, which are passed on to the ultimate consumer.

“By 2010, 1% of the population owned 42% of financial wealth, while 80% of the population owned only 5% of financial wealth. Dr Kennedy observes that the bottom 80% pay the hidden interest charges that the top 10% collect, making interest a strongly regressive tax that the poor pay to the rich.

“People generally assume that if they pay their bills on time, they aren’t paying compound interest; but again, this isn’t true. Compound interest is baked into the formula for most mortgages, which compose 80% of US loans. And if credit cards aren’t paid within the one-month grace period, interest charges are compounded daily.

For more, see “Why Bankers Rule the World.”

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Student loans to soon trigger economic crash

You may not want to hear this, but a threat is facing the U.S. economy that no one is talking. As discussed today in Le Monde, a veritable Frankenstorm of factors is now coalescing to crash the U.S. economy in the near future, along with other nations. Student loans are spiraling out-of-control  due to declining family incomes, skyrocketing tuition costs, and the wholesale abandonment of public universities by state governments. Christopher Newfield writes in “America’s Degree Scam” that “student debt may succeed subprime mortgages as the next disaster in the crisis of US capitalism. It is estimated at more than $1-trillion and has doubled over the last 12 years. Average debt for graduates with student loans rose to $23,200 in 2008; public university debt was only slightly lower, at $20,200. Despite the impossibility of discharging student debt through bankruptcy, the student loan default rate has gone from 5% to 10% between 2008 and 2011.” A similar story entitles “Debt Tops $1-Trillion” appears in the current Voice of Detroit. Continue reading “Student loans to soon trigger economic crash”